Market power laws ‘ludicrous’: Wesfarmers’ Goyder

“If you’ve got a spending pattern which means over time you’re going to go further and further into debt, then you have to deal with it” ... Wesfarmers chief Richard Goyder.
Photo: Getty Images/Christopher Pearce

by
Phillip Coorey | Chief political correspondent

Australia will sully its economic reform push as host of the Group of 20 leaders summit if it adopts domestic recommendations designed to curb the ­market share of supermarket giants, says Wesfarmers boss and chairman of the G20 business advisory group, Richard Goyder.

Speaking after the B20 handed its reform recommendations to the government – to be presented to the G20 leaders in November – Mr Goyder, whose company owns Coles and Bunnings, said any restrictions placed on their ability to operate and keep prices low would fly in the face of Australia’s message to other nations.

“It’s now important that Australia walks the walk in terms of the G20 and the B20," he told the National Press Club.

Mr Goyder said the G20’s goal was to implement reforms which would benefit consumers and make business and economies more efficient. But changes being pushed to broaden Australia’s misuse of market power laws – as being considered by Ian Harper in a government review – would be ludicrous and could lift prices to the detriment of consumers, Mr Goyder said.

“It’s very important that recommendations from this review are consistent with any policy that the government takes to the G20 later this year," he said, referring to Professor Harper’s review.

Company Profile

“It would mean that business must not take advantage of any market opportunities they have if it had the effect of likely damaging a ­competitor."

Professor Harper will give an outline of the direction of his review at a speech in Sydney on Wednesday.

A key issue in that review is whether section 46 of the Competition Act should be changed to ban the misuse of market power that has the effect of ­substantially lessening competition.

That would be a much lower threshold than the current test which requires proof of an anti-competitive purpose or intent. Proving such a purpose has been a key stumbling block that has led to practically no successful prosecutions under section 46.

Small Business Minister
Bruce Billson
has expressed support for a switch from a purpose to an effects test, as has current ACCC chairman
Rod Sims
and a former chairman
Allan Fels
.

Mr Goyder said an effects test would “deter businesses from seeking ­efficiencies and keeping prices low and could even restrict the ability of ­businesses to offer quality services."

“There is a very serious risks the ­consumers would be made worse off," he said.

The Coalition government commissioned the Harper review amid growing concerns, including from within its own ranks, of the impact of the market dominance of Coles and Woolworths and their subsidiaries.

These concerns extended to the impact on smaller businesses which cannot compete with the buying power of the giants and the supermarkets’ suppliers who complain about low prices for their produce.

But Mr Goyder said to those critics of Coles and Woolworths, “be careful what you wish for’’.

He said Coles employed 200,000 people locally and last year, paid $1.5 billion in tax, unlike its greatest and offshore competitors including ­Amazon and foreign-owned domestic competitors Aldi and Costco.

“Some of our competitors from overseas, Aldi, Costco, from what I can gather . . . pay a very, very small amount of tax in this country."

He said the rapid growth of online sales made having a strong storefront presence less and less relevant and Amazon was a $150 billion company which operated on cheap labour and low taxes.

“Too often big is equated with bad," he said. “In our view, size and scale brings substantial benefits through ­efficiencies and that has led to lower prices."

Whether section 46 of the Competition Act should be changed to ban anti-competitive conduct that simply has the effect of harming a competitor, as opposed to the having to prove an anti-competitive purpose, has been a key battle between big and small business lobbies, especially since the High Court’s landmark Boral case in 2003.

The court’s interpretation of section 46 has led to criticism that large companies are able to use their market power to crush their rivals with impunity.

The ACCC is prosecuting Coles for its treatment of some of its suppliers. Despite investigating allegations Coles had misused its market power, the ACCC decided to bring the ­prosecution under laws banning unconscionable conduct instead.

Mr Goyder would not comment on that case but said the ACCC and ­competition law should protect ­consumers, not competitors.

“Consumers must be at the heart of competition policy. It is about competition, not competitors."

Of the other recommendations the B20 has handed to the government, Mr Goyder said they concern facilitating free trade and encouraging the building of infrastructure.

Each G20 nation would be urged to develop an infrastructure plan which would be spread over 10 years to lift it out of domestic political processes.

Mr Goyder said the B20 suggested establishing a G20 infrastructure hub with an agreed set of “golden rules on how a project can happen’’.

The B20 also called for the adoption of the Basel III banking reforms .